IBM Reorg Consolidates Power at the Top

IBM shifts responsibilities for some of its top executives, including bringing software and hardware together under senior vice president Steve Mills.

IBM has reorganized some of its top-level
management, giving more power and responsibility to four senior
executives in a move that helps the company better integrate its
software, hardware and services solutions for customers.

In a July 19 memo to IBM staff, IBM CEO Samuel J.
Palmisano said the changes are needed to enable IBM to better deliver
"tightly integrated" systems and solutions.

The moves in IBM's upper ranks include bringing
the company's software and hardware businesses together under senior
vice president Steve Mills, who has run IBM Software for the last
decade. In another move, Michael Daniels, another IBM senior vice
president who has headed one half of IBM's Global Services
organization, is now in charge of the entire services group. Up to now,
IBM Global Technology Services and IBM Global Business Services each
had separate leadership, but they come together under Daniels.

In addition, IBM senior vice president Virginia
Rometty gains responsibility for IBM's overall marketing and strategy
in addition to the global sales and distribution organization she has
been leading. And IBM's chief financial officer (CFO), Mark Loughridge,
will add oversight of IBM's finance operation as well as oversight of
IBM's internal IT.

Analysts and industry observers have speculated
that the moves will help simplify the process of naming a successor to
Palmisano, who will turn 60 next year. IBM has had a tradition of
having its CEOs step down at age 60. If age is a factor, then Rometty
may have the best chance at succeeding Palmisano, as she is 52.
However, Mills is 58, Loughridge is 57, and Daniels is 56.

Charles King, principal analyst at Pund-IT, said
of Rometty, "Her age makes that [her succession to CEO] a strong
possibility. The board likes to see people stay seven to 10 years at
CEO."

However, King added that he is not so sure
Palmisano will be stepping down at age 60. "I'm not sure that will be
the case for Palmisano or not," King said. "Given the economy and his
track record, he may be given leave to stay longer. He's done a
terrific job."

Moreover, King said he is not convinced the
reorganization moves have anything to do with appointing a successor to
Palmisano or that any of the four executives involved would necessarily
be selected to lead IBM in the future. Though each of them is capable,
he added.

"It's not like this is really unusual," King said.
"IBM does high-level executive reorgs like this all the time. It
usually happens in ones and twos. I think these moves offer evidence of
the way the company has consolidated its products and services. Steve
Mills being head of hardware and software is a pretty natural move."

Indeed, in January, IBM's Mill announced a
reorganization of the company's software business into two groups: IBM
Software Solutions group, headed by Mike Rhodin; and the IBM Software
Middleware Group, headed by Robert LeBlanc. Mills told eWEEK that move
was aimed at evolving the organization and freeing him up to do other
things.

"We've
reached a point in terms of size and in the different things we're
trying to get accomplished that I thought it was time to spread the
organization a little bit. It's sort of the classic challenge of as
things get bigger and bigger you have to come up with practical
division of labor. And I thought we had reached that point where some
of the things we were trying to get done were not getting quite as much
time and attention. My own personal scalability has its limits."

King added that this reorganization supports IBM's
ongoing strategy of delivering "workload optimized systems" consisting
of hardware and middleware at minimum.

In an interview with eWEEK, Tom Rosamilia, general
manager of IBM's System z business, said IBM is simply continuing on a
path the company has been following for some time - that of delivering
integrated systems. "I think that's a good way to look at this,"
Rosamilia said. "We've been doing this kind of work for some time,"
optimizing and integrating DB2, WebSphere and other IBM software with
IBM hardware, he said.

King cited IBM's recent data center in a box offerings and its business analytics appliances as further examples of this trend.

Meanwhile, Alan Krans, senior analyst at
Technology Business Research (TBR), said, "Although IBM has been
tightly integrating its software and hardware product together for
quite some time, the formal realignment signals the integration is a
long-term strategy, not a short term initiative."

Moreover, rating IBM's ability to deliver value and functionality for its customers following this reorganization, Krans said:

"With a broad portfolio of offerings that spans
professional services, hardware, and software, IBM is well-positioned
to deliver software functionality any way its customers so choose, and
the company is aligning its portfolio to do just that. IBM's breadth is
a strong competitive advantage in this respect, and the company is
grouping its software offerings into four delivery categories - public
cloud, private cloud, purpose-built device delivered, and traditional
on-site software delivery. As opposed to pure-play cloud vendors such
as Google or Salesforce.com, TBR believes IBM's multifaceted delivery
approach will most closely match actual customer adoption patterns. Few
customers will fall cleanly into a single delivery method, and the vast
majority will employ multiple software delivery methods depending on
their specific requirements and existing IT assets."

"I think we'll see the traditional walls between
hardware platforms will be removed" at IBM, King said. Indeed, the
reorganization "is more of an indication of a broader strategic shift
that we've been seeing at IBM and delivered in efforts like the Smarter
Planet initiative."

Darryl K. Taft covers the development tools and developer-related issues beat from his office in Baltimore. He has more than 10 years of experience in the business and is always looking for the next scoop. Taft is a member of the Association for Computing Machinery (ACM) and was named 'one of the most active middleware reporters in the world' by The Middleware Co. He also has his own card in the 'Who's Who in Enterprise Java' deck.